Zero-down-payment mortgages are back in San Francisco

Updated 11:25 am, Friday, December 11, 2015

A new zero-money-down loan program aims to make it easier for buyers to get in to San Francisco's booming housing market.

A new zero-money-down loan program aims to make it easier for...

Remember no-money-down mortgages from the last housing bubble? They're back.

San Francisco Federal Credit Union this week introduced a loan program that will allow Bay Area buyers to finance their homes up to $2 million, with no down payment and no requirement for mortgage insurance, according to HousingWire. The program is intended to make it easier for buyers with sufficient credit and income to get out of renting and into homes.

"Too many of our members have given up hope of buying a home because of escalating home prices and the required down payment," said Rebecca Reynolds Lytle, senior vice president and chief lending officer.

"However, these same families are paying more than a mortgage payment for monthly rent," Reynolds Lytle said. "Paying $3,600 for a one-bedroom apartment is about the same as making a monthly payment on an $800,000 mortgage."

Loose lending standards predominated during the housing bubble that peaked in 2006, leading to the collapse of the mortgage market and the financial crisis of 2008.

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Along with the boom in Bay Area housing prices, skeptics might take the new loans as a sign that the reckless go-go real estate days are coming back. Still, a CNBC article about the S.F. Federal program says there's a difference:

In an atmosphere of continued cautious lending, the product has raised some eyebrows, but it is nothing like the no down payment, no-doc, risky products that were behind the housing crash. Borrowers are fully vetted, income and assets verified, and while there is no minimum credit score, the vast majority of the credit union's borrowers have above-average credit scores.

Nevertheless, there's a reason other lenders require 20 percent down payments or private mortgage insurance. If housing prices go into a correction phase, new homebuyers who didn't put any money down will find themselves underwater on their equity immediately.